Gold rises as Ukraine, inflation concerns lift appeal

LONDON: Gold prices gained on Wednesday as investors looked to shield against soaring inflation and uncertainty caused by events in Ukraine, with elevated U.S. bonds yields capping gains in non-interest bearing metal.

Spot gold was up 0.3% at $1,927.42 per ounce by 1246 GMT. U.S. gold futures rose 0.2% to $1,926.00.

“The market seems to be holding quite well since its sharp correction lower,” with support coming from ongoing geopolitical uncertainty and good physical demand, independent analyst Ross Norman said.

Gold is considered a safe store of value during times of rising inflation and geopolitical uncertainty.

Gold prices advanced to near record highs earlier this month, but then saw a steady decline heading into a key U.S. central bank policy meeting last week. They have since moved into a more steady range.

“What’s phenomenal at the moment and a good indicator of a beginning of a gold bull market is ETF (exchange traded fund) demand remains remarkably strong” as institutional investors now start to focus on the inflation story, Norman added.

Holdings of the world’s largest gold-backed ETF, SPDR Gold Trust, hit their highest since March 2021 this week.

Gold is getting support from debt markets, with government bond futures in Europe recovering losses suffered over recent sessions, said Quantitative Commodity Research analyst Peter Fertig.

Meanwhile, yields on the benchmark U.S. 10-year Treasury hit their highest in nearly three years, increasing the opportunity cost of holding zero-yield bullion.

“In view of the latest steep rise in yields, gold is still holding its own pretty well in our opinion,” Commerzbank analysts said in a note.

“A more pronounced price slide is probably being prevented by the ongoing buying interest shown by ETF investors.”

Spot silver rose 0.7% to $24.92 per ounce, platinum fell 0.5% to $1,017.57, and palladium was up 0.6% at $2,499.18.